Gallup: Confidence in economy falls

The government shutdown and continuing fiscal fights in Washington are rattling the public’s confidence in the U.S. economy at levels not seen since the 2008 financial crisis, according to a new Gallup survey released Tuesday.

Gallup’s economic confidence index plummeted 12 points between Sept. 30 and Oct. 6 — the largest weekly drop since the index declined by 15 points after Lehman Brothers filed for bankruptcy in September 2008.

“Economic confidence could continue to fall in the coming days and weeks as Congress and the president work to reach an agreement to raise the debt ceiling by the upcoming Oct. 17 deadline,” Gallup said in a release.

The index currently stands at -34. In November 2008 — at the height of the financial crisis — the weekly index fell to -59.

The government shutdown that has furloughed some 800,000 federal employees looks likely to continue throughout this week, as congressional Republicans mull over ways to tie legislation to fund the government to a measure to raise the country’s debt ceiling.

The Treasury Department has said the borrowing cap must be lifted by Oct. 17 in order for the Treasury to pay all of its bills, though market analysts watching the government’s revenue stream say there could be some flexibility with this projected deadline.

In recent years, Washington’s negotiations over raising the debt ceiling have negatively influenced economic confidence, suggesting that as Congress gets closer to the Oct. 17 deadline without reaching an agreement to up Treasury’s borrowing limit, the public’s economic confidence could drop further.

For example, during the political showdown in Washington that led up to the eventual raising of the debt limit in July 2011, Gallup’s economic confidence index dropped by 8 points in two separate weeks that month. The fiscal brinkmanship in 2011 led Standard & Poor’s to downgrade the U.S. credit rating for the first time, from AAA to AA+.

Tuesday’s Gallup poll was conducted from Sept. 30 to Oct. 6 among 3,580 adults living in the United States. The margin of error is plus or minus 2 percentage points.